CalPERS Claims Success; Proxy Monitor Says CalPERS Success Leads To Lower Stock Prices

“Fair is Foul, and Foul is Fair” In this press release issued last week, CalPERS congratulated itself on the “success” of its proxy voting initiatives: The California Public Employees’ Retirement System (CalPERS) made significant progress during the 2015 proxy season, where it voted to improve the rights of shareholders to nominate corporate directors – commonly referred

Court Declines To Declare “S” Corporation Shareholders’ Agreement Unenforceable

In general, shareholders of a corporation that has elected to be taxed under Subchapter S of the Internal Revenue Code are taxed on corporate profits regardless of whether the corporation makes any distribution of those profits to its shareholders.  Obviously, paying taxes on income that isn’t actually received can be a problem for many shareholders.

When It Comes To Director Compensation, California Is Not Delaware

Yesterday, I wrote about my disagreements with the approach to director compensation adopted by the Delaware Court of Chancery in Calma v. Templeton, 114 A.3d 563 (Del. Ch. 2015) and Seinfeld v. Slager, 2012 Del. Ch. LEXIS 139 (June 29, 2012).  In both cases, the Court ruled that the rigorous “entire fairness” standard of review applies to director’s who receive grants

What The SEC Pretermitted In Proposing A Clawback Policy Rule

The Securities and Exchange Commission began the month by issuing proposed rules that would direct national securities exchanges and associations to establish listing standards requiring companies to adopt policies that require executive officers to pay back incentive-based compensation that was awarded erroneously.  Five years ago, Congress ordered the SEC to adopt these rules in Section 954 of the

Court Rules Unincorporated Association Aided Director’s Breach Of Fiduciary Duty

Nearly four years ago, I devoted this post about California’s Unincorporated Association Law.  Typically, an unincorporated association is a club, church, or other social organization.  A criminal street gang might also be an unincorporated association.  People ex rel. Totten v. Colonia Chiques, 156 Cal. App. 4th 31 (2007).  In a ruling handed down last week,

Court Rules Shareholders May Be Sued In De Facto Dissolution

California Corporations Code Section 2011 provides that causes of action against a dissolved corporation, whether arising before or after dissolution, may be enforced against its shareholders if any of the assets of the corporation have been distributed to the shareholders. Enforcement is limited to the extent of the shareholders’ pro rata share of the claim or to

Are Delaware Directors Deathless?

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I’ve noticed that the drafters of corporate laws seemed to have overlooked the mortality of directors.  Section 141(b) of the Delaware General Corporation Law, for example, prescribes the term of directors as follows: Each director shall hold office until such director’s successor is elected and qualified or until such director’s earlier resignation or removal. Nevada

California’s Bizarre Voting Records Disclosure Requirement

Some statutes are so poorly drafted that one hardly knows where to begin.  One such statute is Section 711 of the California Corporations Code.  According to the legislature, the purpose of the statute is “to serve the public interest by ensuring that voting records are maintained and disclosed as provided in this section [Section 711]”. 

Is The SEC Confused About Who Solicits Proxies?

In reviewing some recent proxy bylaw provisions, I noted that some refer specifically to solicitations “by the Board of Directors”.  See, for example, this bylaw provision recently adopted by Monsanto Company.  This reference to solicitations by the Board of Directors makes some sense in light of the instruction in SEC Rule 14a-4(a) that the form of

Should Directors Be Required To Have Valid Passports?

Lately, I’ve had occasion to think about director qualifications.  Section 212(b)(4) of the California Corporations Code permits the bylaws to to specify the qualifications of directors.  In Section 141(b),the Delaware General Corporation Law similarly authorizes the certificate of incorporation or bylaws to prescribe director qualifications.  Qualifications should be appropriate to the corporation’s business and purpose.